USA Rare Earth surges on $3.1B funding deal with U.S. government
Washington to take 10% stake in rare earths miner as part of CHIPS Act push for domestic supply chain
USA Rare Earth shares surged more than 9% on Monday after the company announced a $3.1 billion funding package that will see the U.S. government take a 10% stake, marking one of the largest federal investments in domestic critical minerals production to date.
The Oklahoma-based company signed a letter of intent with the Department of Commerce's CHIPS Program for access to $1.6 billion in funding, comprising $277 million in direct federal support and a $1.3 billion senior secured loan. Concurrently, USA Rare Earth secured $1.5 billion in private sector investment through a common stock PIPE transaction anchored by Inflection Point, bringing total capital raised to $3.1 billion, according to the company's announcement.
Under the terms of the government transaction, the U.S. will acquire 16.1 million shares of USA Rare Earth at $17.17 per share, representing a 25% discount to Friday's closing price of $22.71. The deal includes approximately 17.6 million warrants, giving Washington a 10% ownership stake in the rare earths developer. The private PIPE placed 69.8 million shares at $21.50 each, according to reports.
The stock jumped 9.1% to $24.77 in midday trading, giving the company a market capitalization of $3.45 billion. The rally pushed shares above their 50-day moving average of $15.61, though they remain well below the 52-week high of $43.98 set earlier in the year.
The funding is aimed at accelerating development of a domestic mine-to-magnet supply chain for heavy rare earth elements, materials essential for defense applications, electric vehicle motors, wind turbines and advanced electronics. Currently, China controls approximately 98% of global rare earth processing capacity, creating what policymakers have identified as a strategic vulnerability for U.S. national security and technology competitiveness.
USA Rare Earth's flagship Round Top deposit in West Texas contains more than 1 billion tons of resources spanning 15 of the 17 rare earth elements, including critical heavy rare earths like dysprosium and terbium. The funding will support the company's plans to extract 40,000 metric tons per day of rare earth and critical mineral feedstock from Round Top by 2030, process 8,000 metric tons annually of third-party heavy rare earth elements, and establish 10,000 tons per year of neodymium-iron-boron magnet manufacturing capacity, according to company documents.
"This investment represents a transformative milestone for USA Rare Earth and for U.S. national security," said analysts covering the transaction. "The government's direct stake alongside substantial private capital de-risks the entire project development cycle."
The company remains in the development stage with trailing twelve-month revenue of zero and a negative book value of $0.53 per share. However, analyst sentiment has turned increasingly positive following the funding announcement. USA Rare Earth currently carries a "Strong Buy" consensus rating from Wall Street analysts, with an average twelve-month price target of $26.33, representing 6.3% upside from current levels, according to MarketBeat data. Price targets range from a low of $16.00 to a high of $40.00.
Key production milestones are approaching. The company's sintered neo magnet manufacturing facility in Stillwater, Oklahoma, is scheduled to come online in the first half of 2026, while a demonstration plant in Wheat Ridge, Colorado, is expected to complete at least 2,000 continuous hours of operation in October. Commercial production from the Round Top mine itself is targeted for late 2028.
The USA Rare Earth deal is part of a broader Western push to diversify critical minerals supply chains away from China. Governments in the U.S., Canada, Australia, Japan and Europe invested over $3 billion in rare earth supply chains between January 2025 and January 2026, with the U.S. accounting for $1.4 billion of that total, according to industry analysis. Rare earth exploration budgets reached $155 million in 2025, the highest level since 2012, with approximately 80% of capital deployed in Australia, Brazil, the U.S. and Canada.
The global rare earth metals market is projected to grow from $8.06 billion in 2025 to $8.43 billion in 2026, expanding at a 4.6% compound annual growth rate, driven by increasing demand from the electronics and automotive industries for permanent magnets. However, analysts caution that the non-Chinese rare earth ecosystem remains in transition, with ongoing challenges in permitting reform, demand signaling and workforce development.